Why Q1 GDP Was So Weak

The Bottom Line: Q1 GDP was even weaker than expected, rising by just an annualized 0.5%. While it’s too soon to tell whether this is part of a pattern that has persisted for the past few years (where Q1 growth has been anemic, only to rebound in subsequent quarters) the report was a disappointment nonetheless. The drop in business spending (-5.9% QoQ annualized) was largely due to a record 86% plunge in mining (oil wells and rigs count as non-residential investment), but other components of the report were weak, too; Trade shaved off 1/3% of a percentage point from growth—the most in a year—as did inventories. Despite healthy growth in personal disposable incomes, the savings rate rose by 0.2pp to 5.2%. One bright spot? The largest increase in Core PCE prices (+2.1%) since Q1 2012.